Make sure you set the internal dial tone to "external" so that it resembles the dialtone of a CO. The dial tone on the Merlin IIs and Legends are defaulted to the "Merlin Internal Dialtone."
You should look for the setting, "Intercom Dial Tone" or something to that effect and select external.
I've had experience where some modems did not recognize the AT&T/Lucent factory dialtone, but rather a simulated CO tone.